Coronavirus: Can I Get Out Of This Contract? Breach Of Contract, Force Majeure Or Frustration

• Published date: 23 June 2020
• Subject Matter: Corporate/Commercial Law, Coronavirus (COVID-19), Contracts and Commercial Law, Litigation, Contracts and Force Majeure
• Law Firm: Keystone Law
• Author: Ms Alison Bradley

Alison Bradley considers the contractual and legal implications for businesses under UK law.

As the world grapples with the coronavirus and we wonder what the future will hold, it has had a considerable and immediate impact on many businesses and for some the future looks uncertain.
COVID-19 will lead to a wave of disputes in relation to contracts and who bears the risk for non-performance. It is important to take stock early and consider your position.

Many businesses will be wondering whether they can get out of certain agreements, or ensure agreements are complied with and in some cases, whether their obligations can be renegotiated. The fundamental principle in English law is that ongoing performance of a contract is absolute, so many people may simply find themselves in breach of contract, but there are some exceptions:

Force Majeure

If there is no Force Majeure clause, the contract may be frustrated. If there is, consider invoking this clause. Force Majeure is a contractual right and is a 'shield' against breach; it suspends rather than terminates the contract. Force Majeure can only be invoked in certain situations. Consider the following:

• Is there a Force Majeure event? This must be an event which was unforeseeable, unavoidable and insurmountable. It must be beyond the parties' reasonable control;
• Does the Force Majeure clause cover this event? This depends on how the clause is drafted, which must be scrutinised;
• Is the Force Majeure event the sole cause of the inability to perform the contract? If there is a contributory cause, then it may be found that Force Majeure was not the cause.
• A party is under a duty to do what they can to meet their contractual obligations and mitigate (the test as to what is adequate, varies). If no or insufficient mitigation has taken place, invoking the clause may fail; and
• Has proper notice been given? The Force Majeure clause must be invoked with a valid notice, which must be served correctly.

In March 2020, the UK Government issued regulations imposing restrictions on...